Asia-Pacific markets rise as China reopens borders with Hong Kong

BofA has added a number of biotechnology stocks — a sector that is hot on Wall Street right now – to its list of top picks for the first quarter.

The bank identified the biotech stocks, as well as some medical technology companies, as part of its thematic investing picks, on themes it says are related to a “transforming world.”

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— Weizhen Tan

Australia’s building approvals fell further than expected in November, according to data released by Australia’s Bureau of Statistics.

The seasonally adjusted estimate for November showed total dwellings approved fell 9% compared with the previous month, much further than expectations in a Reuters poll of a 1% decline.

The approval of private sector houses fell 2.5%, while private sector dwellings excluding houses fell 22.7%.

The value of non-residential buildings rose 2%, while the value of total buildings declined 1.5%, the release said.

— Jihye Lee

Richmond Federal Reserve President Thomas Barkin said Friday the central bank has to keep working to bring down inflation but can do so with a little less intensity.

“We still have work to do,” the central bank official said in prepared remarks. “Inflation is too high, and we will need to stay on the case until it is sustainably back to our 2% target. We have forecasted additional rate increases this year.”

Policymakers indicated in December that they’re likely to take rates up another percentage point or so before pausing. Atlanta Fed President Raphael Bostic earlier in the day told CNBC he expects the central bank’s benchmark funds rate rising past 5%, from its current 4.25%-4.5% target range.

Barking did not specify how high he thinks the rate should go. However, he said the Fed now can move “more deliberately” after raising rates aggressively seven times in 2022.

—Jeff Cox

Top tech analyst Mark Mahaney has a positive outlook on tech stocks after a brutal year for the sector in 2022.

But investors should remain selective, according to the analyst, who revealed three top picks for 2023.

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— Zavier Ong

The December jobs report shows the economy is still adding jobs at a strong rate, but investors focused on the fact that wage growth is slowing, suggesting inflation may be ebbing.

Stocks rallied after the 8:30 a.m. ET employment report showed 223,000 jobs were created in December. Average hourly wages grew at an annual pace of 4.6%, less than the 5% expected by economists.

“The big move was the fact that average hourly earnings came in lower than expected. That suggests that investors are focused intently on inflation, and whether that inflation is moving toward the Fed’s target,” said Michael Arone, chief investment strategist at State Street Global Advisors.

But he also cautioned that the data could be double-edged, since it suggests the economy and employment are still strong. That could help keep inflation elevated and keep the Fed hiking more than markets might expect.

The Fed next meets Jan. 31 and Feb. 1. While some economists anticipate a half point hike after that meeting, traders in the futures market put greater odds on a smaller, 25 basis point hike. A basis point equals 0.01 of a percentage point.

“Data like today suggests the Fed could do 50 basis points,” said Arone. A more aggressive Fed could create more market volatility.

The Fed has been trying to slow the economy and the hot labor market through its rate hiking, which has taken the fed funds target rate range to 4.25% to 4.50%.

 Peter Boockvar, chief investment officer at Bleakley Financial Group said market expectations did not change after the jobs report, and the fed funds futures contract for February was pricing in another 32 basis points of hikes.

“It’s pricing 100% chance of a 25 basis point hike, and a 30% chance for an additional 25. Peak fed funds is still at 5%” for July, he said. “The market is still expecting the Fed to go another 60, almost 70 basis points,” he said. Boockvar said the end point for the Fed matters more than if it raises by 25 basis points or 50 when it next meets.

–Patti Domm

Shares of legacy automakers and parts manufacturers will attract new investors as they transition toward electric vehicles and green technologies, according to Goldman Sachs.

As traditional auto companies grow their share of income from new carbon-neutral technologies, they’re likely to be gradually included in ESG funds and benefit from a share price boost, the Wall Street bank said.

The investment bank named 13 stocks that will benefit from the new trend, including one it gives over 100% upside:

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— Ganesh Rao

The services sector contracted in December amid a pullback in new orders and production, the Institute for Supply Management reported Friday.

The ISM Services index fell to 49.6% for the month, well below the Dow Jones estimate for a 55.1% reading. The gauge measures the percentage of businesses reporting expansion, with a reading below 50% indicating contraction.

New orders fell 10.8 percentage point while business activity and production dropped 10 points. Prices fell 2.4 points to 67.6%, still a high number but representative of some softening in inflation. Employment also fell, moving down 1.7 points to 49.8% and into contraction territory.

—Jeff Cox

December’s employment report helps add to the narrative that the U.S. may be able to avoid a recession, Goldman Sachs chief economist Jan Hatzius said Friday.

“We’re growing at a below-trend pace that’s necessary to rebalance the economy. Wage growth is gradually decelerating, price inflation is pretty quickly decelerating,” Hatzius said on CNBC’s “Squawk of the Street.” “I think that should be encouraging for a soft landing.”

He spoke after the Labor Department reported a 223,000 increase in nonfarm payrolls and a 4.6% annual rise in average hourly earnings, the slowest pace for the latter metric since August 2021.

—Jeff Cox